Scomi Marine Disposal Of Assets For A LOSS of RM 433 Million!

Scomi Marine has announced a disposal of some key assets.

Business Times version: Scomi Marine sells 5 overseas assets for RM550m
Star Business version: Scomi Marine brings in strategic investor for Indon ops
Bernama version: Scomi Secures Strategic Investor For Indonesian Coal Logistic Business
Edge Financial Daily: Scomi Marine active, down in early trade

And here is Scomi Marine's announcement posted on Bursa website: Announcement (FINAL).pdf

Page 5:

• EFFECTS OF THE PROPOSALS
  
  SMB expects to receive USD171,800,000 (equivalent to RM549,330,500 based on the exchange rate of USD1:RM3.1975 as quoted by BNM on 12 July 2010) in cash proceeds upon completion of the Proposals, while retaining an equity interest in PTRT of up to 24.55%.
  
  The Proposed Disposals are expected to result in SMB realising a loss on disposal of about RM433 million (which is subject to change, the final amount of which will be determined on the Completion Date).

Yup. This disposal would result in Scomi Marine realising a loss on disposal of about rm 433 million!!!!!!

And you would think that for the size of the loss, our local media would at least want to mention a word or two on it.

Here's Business Times version:

• Scomi Marine sells 5 overseas assets for RM550m
  
  By Zuraimi Abdullah Published: 2010/07/13
  
  It is learnt that Scomi Marine plans to pare down its debt from the RM550 million proceeds and may consider giving out a special dividend and invest in new businesses
  
  Scomi Marine Bhd (7045) is selling its entire 100 per cent stake each in four overseas subsidiaries and 94.9 per cent in another foreign firm, all dealing in coal transportation sector, for a total of RM550 million.
  
  The deal announced yesterday will also see Scomi Marine substantially diluting its stake in 80.54 per cent-owned PT Rig Tenders Indonesia Tbk (PT Rig) to less than one third.
  
  In return, PT Rig will have a new controlling shareholder in Portside Offshore Inc, owned by a private fund in Indonesia.
  
  The exercise will see Scomi Marine repositioning itself to become a well-capitalised marine logistics player to tap growth opportunities in emerging markets, its president Mukhnizam Mahmud said in a statement yesterday.
  It is learnt that Scomi Marine plans to pare down its debt from the RM550 million proceeds.
  
  The company may also consider giving out a special dividend and invest in new business opportunities.
  
  The five subsidiaries are CH Logistics Ltd, CH Ship Management Pte Ltd, Goldship Pte Ltd, Sea Master Pte Ltd and PT Batuah Abadi Lines.
  
  They will first be sold to PT Rig for an aggregate sum of US$171.8 million (RM549.76 million), according to the Scomi Marine statement.
  
  PT Rig will pay for the acquisitions via a renounceable rights issue involving 1.3 billion to 1.8 billion shares.
  
  Scomi Marine will renounce its entitlement to the rights shares, which will subsequently reduce its PT Rig stake to between 20.63 per cent and 24.55 per cent......
  
  
  Read more: Scomi Marine sells 5 overseas assets for RM550m http://www.btimes.com.my/Current_News/BTIMES/articles/smiku/Article/#ixzz0tWf11600

Pare down its debts? Ah...

Here's Scomi Marine last reported earnings on May 2010: Quarterly rpt on consolidated results for the financial period ended 31/3/2010. Scomi Marine has cash equivalents of 74.4 million and debts and debts of over 486.490 million. ( ah.. too much debts. :P )

And a brief look back at the past, back on 15 Feb 2005:

• Scomi keen to raise Habib stake to 46%
  
  BY B.K. SIDHU
  SCOMI Group Bhd is keen to raise its stake in Habib Corporation Bhd to 46% if given the option to subscribe to the preference shares the latter intends to issue to raise funds to buy the core marine assets and business of Singapore’s Chuan Hup Holdings Ltd.
  
  Yesterday, Habib announced a plan to buy the core marine assets and business of Singapore Stock Exchange-listed Chuan Hup for RM1.31bil, to be satisfied via a RM1.1bil cash payout and a share issuance.
  
  To raise the RM1.1bil cash, Habib will undertake a fund raising exercise that involves a share sale and a non-recourse debt.
  
  Upon completion of the exercise in the fourth quarter, Scomi will end up with 29.6% stake in Habib, while Chuan Hup will become the second largest shareholder with 28.9%. Habib managing director Meer Sadik Habib’s stake will be diluted to 16.8% from 66%. Institutional investors will have 16.3% stake and the investing public 8.4%.
  
  “Habib will incorporate a new company (newco) in Singapore. The newco will raise RM644mil in non-recourse debt to part finance the acquisition,’’ Scomi senior vice-president Hilmy Zaini Zainal told reporters in Kuala Lumpur yesterday.
  
  Besides the RM644mil in non-recourse debt, Habib will sell 174 million shares at RM1.15 per share to Scomi to raise RM200mil; propose a 1-for-1 rights issue at RM1.15 per share to raise RM85mil; undertake a 160 million preference share sale to raise RM160mil; and sell new shares to institutional investors at RM1.25 a share to raise RM120mil.....

So the five subsidiaries included in the sale by Scomi Marine are CH Logistics Ltd, CH Ship Management Pte Ltd, Goldship Pte Ltd, Sea Master Pte Ltd and PT Batuah Abadi Lines. These companies were part of Chuan Hup/Habib/Scomi deal way back in 2005.

On the Business Times article today, Scomi Marine's president justifies the sale..

• Mukhnizam said the disposals are both strategic and timely.
  
  The marine logistics and offshore support vessels businesses in Indonesia have become increasingly challenging given the intensifying competition, changes to local regulations relating to ownership and cabotage as well as pressures on charter rates.
  
  "We recognise the need for a strategic investor (Portside Offshore) that can play an integral role in growing our business," Mukhnizam added.
  
  Scomi Marine has identified India as a key focus among its targeted emerging markets for high-growth opportunities.
  
  The company, however, remains bullish on the Indonesian market as its coal production sector is expected to expand, thus increasing the need for marine logistics services.
  
  "We have selected to dispose of our existing assets today (Monday) so that we can participate and harvest greater rewards in a bigger, stronger entity in the foreseeable future," Mukhnizam noted.

A loss of disposal of rm 433 million would be incurred. What do you think of Scomi Marine's explanation of the sale?

The boss said "The marine logistics and offshore support vessels businesses in Indonesia have become increasingly challenging".

Could the investing public see the financial numbers from the five subsidiaries, CH Logistics Ltd, CH Ship Management Pte Ltd, Goldship Pte Ltd, Sea Master Pte Ltd and PT Batuah Abadi Lines, being sold?